Of Special Interest
- Financial wellness affects half of peoples’ mental or physical health, finds report
- Study finds traditional financial institutions embrace Fintech disruption
- Grass is greener for environmentally friendly businesses, finds Barclays
- Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander
- Millennials’ needs are changing the face of banking industry, says new report
- FS is putting consumer data at risk by failing to protect mobile apps, says Arxan
- A lack of belief in their ability holds 28% women back in work, says Cambridge & Counties
- ‘Which?’ reveals Scotland has lost over a third of its bank branches in eight years
- Next downturn unlikely to be as bad as 2008, according to S&P
- FCA reveals findings from first cryptoassets consumer research
- US consumers favour single mobile app for banking and payments
- Banks suffering major IT shutdowns every day, ‘Which?’ reveals
- The US will be a key offshore centre in 2019, says GlobalData
- Debit industry changes markedly in 10 years of the Debit Issuer Study
- UK's ‘Big Five’ face ‘too big to compete’ as small challengers secure stellar returns
- Banks as vulnerable now as before crash, says new study
- Leverage ratio a constant conundrum for European and US banks, says SNL
4th October 2011
Consequences to BoA of the Debit card fee
Bank of America confirmed at the end of last week that it would charge basic checking account customers a fee of $5 for each month in which they use their debit card for a retail purchase. ATM usage, mobile top-ups and online bill-paying will not incur a charge. The fee will start next year. A bank spokeswoman is quoted as stating that the bank is "adjusting our pricing to reflect today's economics."
The announcement generated tens of thousands of online comments and the great majority, not surprisingly, were negative. Customer sentiment was not helped by the fact that during Thursday and Friday of last week there were intermittent interruptions to the online banking services. One online news article attracted over 1,690 comments.
One of the few defenders of the policy stated that it was a transparent charge as opposed to many of the hidden charges levied by banks. Whilst true customers want 'free banking', even if they know its not really free in all circumstances. Wells Fargo and Capital One have said there will not introduce monthly fees upping the competitive stakes. Apathy and a cynicism towards all banks is likely to mean that after an initial wave of defections, probably not that large compared with the customer base size, the attrition rate will take some to become clear. It is probably that many defections may be triggered by specific events such as moving house or job. The move will be to another bank and not another branch as it might otherwise have been, similarly when the bank makes a mistake the account will move. Other banks not charging will probably find their new customer campaigns significantly more effective and BoA bank find its campaigns not effective. One thing that may hurt in particular is that the charge is likely to annoy the older customers at least as much, if not more, then the younger due to the fact they are not so used to paying charges. It is the older customers who are likely to keep separate savings accounts and higher balances in their checking accounts. As for the 'today's economics' remarks, banks in Europe have been restricted in what they can charge for debit card usage for some years to a greater extent than the Durbin Amendment imposes and yet in general have chosen not to impose a monthly fee.
A significant number of observers believe that rather than any total about turn it is probable that Bank of America will place more and more customers into accounts that do not charge this fee so backtracking without having the public humiliation of admitting to the error.